A Dover, Delaware, plant has developed the accompanying supply, demand, cost, and inventory data. The firm has a constant workforce and meets all its demand. Allocate production capacity to satisfy demand at a minimum cost. What is the cost of this plan? Supply Capacity Available (units)

Question

A Dover, Delaware, plant has developed the accompanying supply, demand, cost, and inventory data. The firm has a constant workforce and meets all its demand. Allocate production capacity to satisfy demand at a minimum cost. What is the cost of this plan?

Supply Capacity Available (units)

PERIOD	REGULAR TIME	OVERTIME	SUBCONTRACT
1	300	50	200
2	400	50	200
3	450	50	200

Demand Forecast

PERIOD	DEMAND (UNITS)
1	450
2	550
3	750

Other data

Initial inventory	50 units
Regular-time cost per unit	$50
Overtime cost per unit	$65
Subcontract cost per unit	$80
Carrying cost per unit per period	$ 1
Back order cost per unit per period	$ 4

Accepted Answer

Cost of plan:
Period 1: 50($0) + 300($50) + 50($65) + 50($80) = $22,250
Period 2: 400($50) + 50($65) + 100($80) = $31,250
Period 3: 50($81) + 450($50) + 50($65) + 200($80) = $45,800[latex]^*[/latex]
Total cost $99,300
[latex]^*[/latex]Includes 50 units of subcontract and carrying cost.

Question 13.SP.2: A Dover, Delaware, plant has developed the accompanying supp...

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